Procurement Negotiation With No Defined End Goal.
By Mark Hubbard |
Although negotiation is a completely Day to Day activity, it is rare for negotiations to dominate headlines over a long period as has been the case in 2018. We have major negotiations centred on Brexit, on trade partnerships, on denuclearisation, all being commented on.
What are our wants and needs?
One facet which seems to be common is a style of negotiations in which at least one of the parties has adopted a style of negotiation in which it has no idea what it is negotiating for, beyond a general position. We need to look at this and to question if there is anything to learn for procurement organisations. (For those with limited time, the answer is No).
In the Brexit negotiations, the UK team is still trying to work out what it wants and needs as an outcome. Although the will of the people, in a binary decision, has been established, the day to day detail of what that actually means has a multitude of potential outcomes, many of which have unintended consequences. The lack of pre-agreed direction significantly weakens any negotiating position, unless the eventual position being sought is the one in which many on both sides believe is the least desirable position – no agreement at all. Although this plays into the hands of a subset of the UK team, it is a position which still needs a significant amount of definition and work post Brexit, as some form of trade agreement will still be needed.
The CEO negotiator
In US trade negotiations, positional bargaining seems to have taken hold, with unilateral trading happening. More interestingly, the role of the CEO negotiator, operating without apparent reference to internal positions and outcomes, is a particular feature. Recent commentary in mainstream reporting suggests a freewheeling approach to developing positions and a willingness to signal apparent changes in direction with as yet unclear benefits.
Both of these characteristics- unclear or unaligned requirements amongst stakeholders, and senior level negotiation, can be regular features of procurement negotiation, and we should all be aware of the challenges they pose. Our primary role in negotiation preparation is to drive in the necessary clarity in what we, as a business, both need and want, to ensure internal alignment on that and to manage any positions where the requirements may be determined by the suppliers position. Where we can do that, our organisation is in a far better place to both maintain and achieve a position, or to evaluate the impact of any change.
The CEO negotiation is a feature we have to deal with. Clearly, the role implies a level of authority and decision-making capability, but the implications of that are considerable. Firstly, other negotiators are in a weaker position – the other party has access to a decision-making authority that means any disagreement with the negotiators will be referred upwards. Second, the lead negotiator, now the CEO role, needs to be on top of the detail, aims, goals and outcomes required, or there is a serious risk of a sub-optimal deal being developed, or of one side playing the other.
Managing the challenges through good preparation
Both challenges (lack of agreement, and CEO negotiator) can be managed through good preparation before the main negotiations happen and having a process to follow which drives discussions in those areas can make the activity a lot easier. Of the two areas, the CEO negotiator is often easier to deal with and good preparation can make for a really strong negotiation. Lack of agreement can mean that a lead negotiator needs to pull the various parties together and have the capability to create the necessary agreement before the negotiations start. That can be a real challenge, but it is one we will explore further in future blogs.
Ways to strengthen our position
Working within a process to develop and agree the negotiables amongst our stakeholders, or to develop different negotiation scenarios and strategies, are powerful ways to strengthen our position. We’d be happy to show you how we tackle these issues.
Future Purchasing helps you deliver excellent negotiations through a structured, procurement focused negotiation. Find out more by reading our Negotiation Training pages.
About Mark Hubbard
30+ years experience in procurement and supplier management, in line and consulting roles
Previous employment: Positive Purchasing Ltd, SITA,
QP Group, BMW, SWWS, Rover
Education: BSc in Engineering Metallurgy, MBA University of Plymouth
CIPS: Current Member